ANNUAL REPORT. 1 January December 2010

Transcription

1 ANNUAL REPORT 1 January December February 2011

2 TABLE OF CONTENTS INDEPENDENT AUDITOR'S REPORT SUMMARY NOTES General characteristics Company data Characteristics of the Fund Operations Accounting system The Fund s scope of activity The Fund s governing body and auditing Financial and economic environment The number of member institutions Trends and composition of savings and deposits Distribution of savings by type of protection Compensation obligations of the Fund The Fund s revenue from premiums Fund ratio Explanation to balance sheet items Intangible assets Tangible assets Inventories Receivables Securities Liquid assets Prepaid expenses Provisions Long-term liabilities Short-term liabilities Accrued expenses Equity Explanation to the items of the profit and loss statement Revenues from deposit insurance and other revenues Operating costs, expenses Results of financial activities Extraordinary profit/loss Supplementary data Headcount, payroll accounting The Fund s assets, financial and earnings positions Presentation of the securities portfolio and assessment of the asset managers work Summary evaluation of the profit Trends of the Fund s equity and profits from foundation up to date Explanations for the major differences between projected and actual data for SUPPLEMENTARY INFORMATION AND REFERENCE DATA Institutional communications of the NDIF

3 2.2 Events related to liquidation in progress Heves és Vidéke Takarékszövetkezet under liquidation ( UL ) Általános Közlekedési Hitelszövetkezet UL Legal matters Legal proceedings Other liabilities IT developments in International activity Tasks defined by the Board of Directors of the NDIF, and their implementation INSTITUTIONAL OBJECTIVES, STRATEGIC GOALS Institutional objectives Strategic objectives, strategic tasks and action plan APPENDIX

4 Tax number: Statistical number: National Deposit Insurance Fund BALANCE SHEET version 'A' ASSETS Seq. Description / in HUF thousand Effect of No. revision 1 A FIXED ASSETS 52,275 52,494 2 I. INTANGIBLE ASSETS 34,719 37,508 3 I.1 Capitalized value of formation and transformation 4 I.2 Rights and concessions 5 I.3 Intellectual property 34,719 37,508 6 I.4 Advance payments for intangible assets 7 I.5 Revaluation of intangible assets 8 II. TANGIBLE ASSETS 17,556 14,986 9 II.1 Lands and buildings and related rights 104 1, II.2 Equipment, fittings, vehicles 17,452 13, II.3 Assets under construction 12 II.4 Advance payments on capital projects 13 II.5 Adjusted value of tangible assets 14 III. FINANCIAL INVESTMENTS 15 B CURRENT ASSETS 82,855,258 88,434, I STOCKS I.1 Materials 18 I.2 Commercial goods I.3 Mediated services 20 I.4 Advances on stocks 21 II. RECEIVABLES 24, , II.1 Receivables from member institutions 23, , II.1.a Premium receivables 24 II.1.b Receivables transferred to the Fund 23, , II.1.c Premiums on onerous obligations 26 II.1.d Other receivables from member institutions 27 II.2 Other receivables from credit institutions 28 II.3 Receivables from depositors 29 II.4 Receivables from the state 30 II.5 Other receivables III. SECURITIES 82,829,242 88,068, III.1 Government securities 82,829,242 84,640, III.2 Other securities 3,427, IV. LIQUID ASSETS 1,914 28, IV.1 Cash, cheques IV.2 Bank deposits 1,754 28, C PREPAID EXPENSES AND ACCRUED INCOME 2,898,179 2,451, TOTAL ASSETS: 85,805,712 90,938,430 9 February 2011 Based on the audit report, I hereby certify the above: 9 February

5 Tax number: Tax number: Statistical number: S. No. National Deposit Insurance Fund BALANCE SHEET version 'A' EQUITY AND LIABILITIES Description / in HUF thousand Effect of revision D. EQUITY 85,073,955 90,771, I. REGISTERED CAPITAL 896, , II. RESERVES 70,725,129 84,177, III. REVALUATION RESERVE 43 IV. RETAINED PROFIT FOR THE YEAR 13,452,744 5,697, E. PROVISIONS 45 F. LIABILITIES 727,561 95, I. LONG-TERM LIABILITIES 47 II. SHORT-TERM LIABILITIES 727,561 95, II.1 Liabilities towards member institutions 49 II.2 Short-term credits 50 II.3 Liabilities towards depositors 78,053 78, II.4 Liabilities towards the State 52 II.5 Other short-term liabilities 649,508 17, G. ACCRUED EXPENSES AND DEFERRED INCOME 4,196 71, TOTAL EQUITY AND LIABILITIES: 85,805,712 90,938,430 9 February 2011 Based on the audit report, I hereby certify the above: 9 February

6 Tax number: Statistical number: National Deposit Insurance Fund PROFIT AND LOSS STATEMENT TOTAL COST 'A' S. No. Description / in HUF thousand Effect of revision Premium revenue from member institutions 2,280,203 2,435, Premium revenue from claims collected on behalf of depositors 3 3 Commission revenue from disbursement of deposits insured with 86 state guarantee 4 4 Other revenue from deposit insurance 36,400 27,401 5 I. Revenues derived from deposit insurance ( ) 2,316,603 2,462,517 6 II. Other revenues 8,320 50,891 7 III. Revenues from other than deposit insurance 8 IV. Revenues from financial transactions 12,529,322 7,034,960 9 V. Extraordinary revenues 10 5 Expenses related to the disbursement of frozen deposits 11 6 Expenses related to receivables collected on behalf of depositors 12 7 Expenses incurred on disbursement of deposits guaranteed by the state 13 8 Other expenses of deposit insurance 337 2,839, VI. Expenses of deposit insurance ( ) 337 2,839, VII. Other expenses VIII. Expenses of other than deposit insurance 17 IX. Expenses of financial transactions 1,166, , X. Extraordinary expenses 19 9 Material-type expenses 76,826 80, Personnel costs 142, , Depreciation write-off 15,049 17, XI. Operating costs ( ) 234, , A. RETAINED PROFIT FOR THE YEAR (I+II+III+IV+V-VI-VII-VIII-IX-X-XI) 13,452,744 5,697,480 9 February 2011 Based on the audit report, I hereby certify the above: 9 February

7 Tax number: Statistical number: Description / in HUF thousand 2009 National Deposit Insurance Fund CASH FLOW STATEMENT Effect of revision 2010 Change In HUF thousand % Composition for the relevant year 1. Retained profit of the year * 13,452,744 5,697,480-7,755, % 21,348.47% 2. Depreciation represented 15,049 17,367 2, % 65.07% 3. Write-off of investments % 0.00% 4. Net change in provisions % 0.00% 5. Net gain on sale of fixed assets % 0.00% 6. Changes in trade creditors -1, , % 0.00% 7. Changes in other short-term liabilities 646, ,873-1,278, % -2,367.63% 8. Changes in accrued expenses 3,525 67,111 63,586 1,803.86% % 9. Changes in trade debtors % 1.78% 10. Changes in current assets (excluding trade debtors and liquid assets) -13,829,972-5,552,972 8,277, % -20,807.00% 11. Changes in prepaid expenses and accrued income -315, , , % 1,673.73% I. OPERATING CASH FLOW -29, ,275 74, % % 12. Acquisition of fixed assets -7,274-17,586-10, % % 13. Proceeds from sale of fixed assets % 0.00% CASH FLOW FROM INVESTING II. ACTIVITIES -7, ,587-10, % % 14. Proceeds from issuance of share capital (capital increase)** 10, , % 0.00% 15. Borrowings % 0.00% Repayment of loans to and deposits by 16. Credit Institutions % 0.00% 17. Capital contribution received % 0.00% Redemptions of shares (capital decrease)** % 0.00% 19. Repayment of loans % 0.00% Loans from and deposits in credit institutions % 0.00% 21. Capital contribution given % 0.00% 22. Changes in liabilities due to founders % 0.00% CASH FLOW FROM FINANCING III. ACTIVITIES 10, , % 0.00% IV. CHANGES IN LIQUID ASSETS -27, ,688 53, % % 7

8 Independent auditor's report 8

9 1 SUMMARY NOTES 1 January December General characteristics Company data Name of the Company: NATIONAL DEPOSIT INSURANCE FUND OF HUNGARY Company type: other organisation: sui generis organisation Tax number: Statistical number: Date of foundation: Subscribed capital: at the time of foundation: HUF 609,544 thousand by the end of business year: HUF 896,082 thousand Activity of the Company: Deposit Insurance Founder: Headquarters: 1027 Budapest, Csalogány u Founder s Seat, residential address Ownership Vote Other (76%- ) direct control name share share effect National Assembly of Hungary 1055 Budapest, Kossuth tér % % Total: % % Characteristics of the Fund Authorized to sign the Report: Auditor: Chief Accountant: Legal representation: Dr. András Fekete-Győr Audit Service Kft. (Zsuzsanna Guzmics) István Nemecz 1027 Budapest, Csalogány u Reg.sz.: Dr. Géza Gálfalvi Operations The operation and ownership relations are governed by Act CXII of 1996, and the Fund is operated in compliance with the relevant provisions. The daily turnover is monitored and recorded in a computer program (Microsoft Dynamics NAV program) that guarantees closed data processing. 9

10 1.1.4 Accounting system Accounting currency: Hungarian forint Accounting system: Double entry book-keeping Business year: 1 January 2010 to 31 December 2010 Type of profit and loss statement: total cost method Profit and loss statement version: A Balance sheet version: A Customary balance sheet date: 31 January 2011 Balance sheet date for the company per item: fixed for each balance sheet item Rule-off date: 15 February 2011 Authentication based on: annual report Statutory reporting form: other report, type: as regulated by Government Decree No. 214/2000 (XII. 11.) for deposit insurance funds Itemization of the balance sheet: -new items added: -new items added: - items consolidated: - items consolidated: Itemization of the profit and loss statement: -new items added: -new items added: - items consolidated: - items consolidated: Requirements for the accounting principles: diversions from the accounting principles: -. diversions from legal requirements, allowed by auditing: -. changes in the principles of evaluation used: -. assets or liabilities with a changed classification: -. material errors with an effect that generate an audit requirement for the year it was incurred in: 2% of the total assets. effect of material error is 20% of the equity in the annual report published last: HUF 18,154,287 thousand. individual evaluation is selected as the method used for stating depreciation of investments and securities. evaluation at real value not applied. permanence: irrespective of the date of entry in the books, a continuously increasing/decreasing permanent tendency over one year. a uniform exchange rate used on evaluating foreign currency assets and liabilities: the central bank (NBH) mid-rate. The exchange rate differences are stated by the enterprise if they have a significant and permanent effect on the group of assets or liabilities: Modifying effect: for the asset group of receivables > 5%, or Modifying effect: for the liabilities group of obligations > 5%, or Modifying effect: for the asset group of securities > 5%, or Modifying effect: for the asset group of financial assets > 5%. And: the effect is significant in any case when the summary effect of revaluations on the profit/loss exceeds 2% of the profit for the relevant year. And: the effect is not significant if its effect on the profit/loss is less than HUF 500 thousand. 10

11 the qualifications of significant, material and crucial are fixed for each asset group. The balance sheet lines are indicated by Roman numeral, while lines of balance sheet items by Arabic numbers. our annual closure and the relevant report complies with the requirements and is consistent, in our work, the principle of precaution and the principle of authenticity are represented, and are used with the principle of on-going concern. The completeness of processing is guaranteed by our statement of completeness. Between the dates of the annual closure and the balance sheet rule-off date, no material information has emerged to modify the company s situation; consequently, the company s closing data are evaluated on an ongoing concern The Fund s scope of activity Pursuant to section 105 (1) of the Act on Credit Institutions and Financial Enterprises (hereinafter referred to as the Act), the main function of the Fund is to commence and complete payment of compensation to depositors within twenty working days, in case the deposits kept at the member institutions are frozen, or pursuant to the Supervision s resolution or in case a liquidation procedure is instituted, after a court order for liquidation is published - at the earliest of the three dates The Fund s governing body and auditing The Board of Directors In accordance with section 110 (1) of the Act on Credit Institutions, the governing body of the Fund is the Board of Directors consisting of the Vice President of the National Bank of Hungary (NBH), the Administrative Undersecretary to the Ministry of Finance, the Chairman of the Board to the Hungarian Financial Supervisory Authority (HFSA), and two representatives delegated by credit institutions, as well as the Managing Director of the Fund. On an annual basis, the Board of Directors elects a chairman and a vice-chairman out of its members. Initially in 2010, the chairman s position was filled in by Ádám Farkas, and then from 1 July, by HFSA president Dr. Károly Szász, while vice-chairman by Managing Director of the National Federation of Savings Cooperatives (Országos Takarékszövetkezeti Szövetség), Antal Varga Auditing the Fund In accordance with section 109 of the Act, financial and accounting audits of the Fund are performed by the State Audit Office. 1.2 Financial and economic environment In 2010, the 0.9% growth seen in Q1-Q3 projects a probability of annual dynamics around 1.2% not seen for years. Over the year, it was only the production of sectors and companies producing products and providing services to external markets that grew; however, in the second half of the year, domestic sales started to rise in certain sectors, too. For the whole year, growth may reach 1.5%. Currently, Hungary has a favourable image in terms of equilibrium indicators, particularly in international comparison. Through the government s temporary measures aimed at increasing the revenues, the original public finance deficit target of 3.8% was successfully achieved. The new government s tax-related measures resulted in a revenue surplus equal to 1% of the GDP. The foreign trade balance also shows a significant excess around EUR 5.5 bn. 11

12 The majority of the public debt (approx. 60%) is financed from foreign funds, partly in HUF and partly in foreign currencies. It is a fundamental factor of external dependence in the Hungarian economy. The state budget for 2011 projects a target deficit of 2.9%. Despite the considerable tax reduction, the expenditures are expected to comply with the plans. Following an annual inflation rate of 4.8% in 2010, it may formulate around 3.8% in The two propulsive sectors will be industry and construction industry. Assuming average weather conditions, agricultural production will grow fast. Retail turnover will see a 2% increase. Lending activity of banks will hardly expand. The economy may see a growth rate around 3%. The foreign trade surplus may exceed the previous year s EUR 5.5 bn. The rise in the number of employees will equal the decrease seen in The unemployment rate will be down from 11.5% to 11%. Capital investments will be up by 4% in In general, gross wages, net wages and real wages will grow by 3.5%, 6-6.5% and 2.5%, respectively. The gross rate of savings will rise to 6% parallel to the growth in households financial assets. Economic grow will outperform that of the EU average. The economy will continue to be driven by exports; however, it is a favourable change that capital investments and consumption are on an increasingly dynamic rise The number of member institutions As of the start of 2010, the Fund had 174 members, including 34 banks and specialised credit institutions (two of which were house savings banks), 135 savings cooperatives and 5 credit cooperatives. During the year 2010, the number of Fund members decreased by two. During the year, one savings cooperative merged with another, and the Supervision withdrew the operating licence of one credit cooperative. Accordingly, the Fund had a membership of 172 credit institutions as of 31 December 2010, of which 34 were commercial banks and specialised credit institutions (including two house savings banks), 134 savings cooperatives and 4 credit cooperatives, 12

13 1.2.2 Trends and composition of savings and deposits The total savings deposited with credit institutions based on the premium returns amounted to HUF 16,937 billion in early 2010, which represents a growth of over HUF 411 billion (2.5%) over the previous year s figure. The distribution of savings per credit institution type was similar to that of the previous year, 92% was deposited with the bank and house savings bank sector, and 8% in the cooperative sector. Table 1 shows that savings deposits decreased within the HUF 411 billion increase in savings. Contrary to the tendencies seen in the previous years, the (insured) bank securities (bonds) did not grow in The weight of deposits remains crucial (over 80%), while the weight of savings deposits keeps decreasing year by year. Savings deposited with credit institutions in HUF billion Table No. 1 Description At the start of 2009 At the start of =100 % Deposits 13,998 14, Of which: saving deposits other deposits 13,313 13, Securities 2,258 2, Interest payable TOTAL 16,526 16, Table 2 illustrates the breakdown of the totals in the previous table by member institution type (data in HUF billion): Table No Banks and home savings banks Savings cooperatives and % credit co-operatives % Deposits 13, , Of saving deposits which: other deposits 13, Securities 2, Interest payable TOTAL 15, , Distribution of savings by type of protection Unlike in the previous years, the ratio of insured deposits did not decrease, but it increased by 2.9%, reaching 72% by the beginning of It is observable that by 2010, the decreasing securities portfolio was coupled with 9-percentage point NDIF protection for securities, compared to the previous year s figure. 13

14 Table No. 3 (data in percentage) Description Distribution of savings by type of protection Insured by NDIF Opening 2009 Guaranteed by the State Not insured Insured by NDIF Opening2010 Guaranteed by the State Not insured Description Deposits Of which: saving deposits other deposits Securities Interest payable Compensation obligations of the Fund The NDIF s premium base, i.e. the increment of the insured savings grew in excess of the total HUF 411 billion growth in savings presented earlier by HUF 777 billion (6.8%). The NDIF s indemnification obligation grew by HUF 392 billion by 2010, and amounted to HUF 7,551 billion. It stemmed from a growing portion insured by the NDIF within savings, and, to a smaller extent, from the adjustment of the indemnification limit to the year-end EUR exchange rate upon disclosing data for the premium return, which caused a limit growth of half a million HUF. Also considering the increasingly restricted state guarantee, the indemnification and guarantee obligation extends to 45% of the total savings in credit institutions. 14

15 Compensation and guarantee obligations for savings held in credit institutions Table No. 4 Description Distribution of total savings by protection type Ratio of compensation or guarantee obligations for the NDIF within the insured* and the guaranteed balance Ratio of compensation or guarantee obligations within total savings kept in NDIF member institutions At the beginning of the insurance year *The insured balance equals to the NDIF premium base Insured by NDIF n.a * n.a Guaranteed by the State Not insured or guaranteed Total (%) n.a The number of insured deposits grew to almost two-fold. Accordingly, the average deposit decreased from HUF 535 thousand to HUF 294 thousand (46%). This decrease, however, was due to 15

16 technical reasons; from 2010 on, the member institutions cannot consolidate for customers, not even by deposit group. This is why they disclose the actual number of deposits. (In the previous years, the member institutions were permitted to consolidate for customers by savings type, which was favourable to them at the time of using different premium rates for classes.) Starting from 2010, the member institutions are to disclose the data consolidated for depositors within the premium base on submitting their premium returns. Based on that in order to facilitate more accurate planning of the NDIF s indemnification obligation three depositor classes are distinguished (depositors holding deposits between HUF 0 and 13.5 million, HUF 13.5 and 27 million and above HUF 27 million). Within the premium base, 50% was below HUF 13.5 million, 40% above HUF 27 million, and the depositors in the middle class represented 10%. Table No. 5 Deposit classes Distribution of savings insured by the NDIF by deposit class in 2010 Total Banking sector Cooperative sector HUF bn % 1000 HUF bn % 1000 HUF bn % 1000 HUF 0 to 13.5 million 6, ,593 5, ,895 1, ,697 HUF 13.5 to 27 million 1, , Above HUF 27 million 4, , Total 12, ,698 10, ,992 1, ,706 Average deposit amount per client, HUF thousand 1.3 The Fund s revenue from premiums 1,255 1, The Fund s own source of revenue (Section 119 of the Act on Credit Institutions) consists of oneoff admission fees, regular and extraordinary payments received from member institutions, yields from the Fund s investments, eighty percent of fines collected from credit institutions by the Supervision, as well as a portion of receivables transferred to the Fund, and, in addition, the Fund may borrow loans. a) Admission fees Credit institutions that have been licensed to raise deposits are required to pay a one-off admission fee to the Fund upon becoming a member institution. The admission fee equals 0.5 % of the member institution s registered capital. In 2010, no such HUF revenue was earned. b) Annual premium payment As specified by Sections 121 (1) and (2) of the Act, the upper limit for the statutory annual regular premium to be paid by members is two per mill of the deposit portfolio of the member institution insured by the Fund as of 31 December of the year preceding the relevant year. This statutory limit has not been fully used by the Fund yet. The average premium rate for deposit insurance significantly decreased between 2000 and 2004, then it stagnated low in the following two years, and in 2008, it dropped to a half. From 2009 on, we introduced a uniform 0.2 per mill premium rate based on the resolution of the NDIF Board of Directors. The NDIF s Board of Directors voted in approval of the uniform premium rate of 0.2 per mill for 2010 too, which means that the average premium rate equals the premium rate. 16

17 The table below demonstrates in a breakdown by sector how the premium payable relates to the theoretical indemnification obligation in a given credit institution sector (specific premium). Dynamics of the specific premiums in 2010 Table No. 6 Theoretical indemnification obligation /HUF 1000 Premium paid in Premium paid in Credit institution 2009 (HUF million) (HUF million) 2010 HUF Bank 1,972 2, Savings co-operative Home savings bank Credit co-operative Grand total 2,279 2, * The data do not contain deviations originating from preferential or increased premiums and from adjustments due to the preceding years. The balance sheet data contains a balance of the listed items. In 2010 the average premium on every HUF 1,000 of the deposit insurance indemnification amount with credit institutions is HUF c) Increased premiums and preferential premiums Besides the regular yearly payment obligations, the Fund may also set increased and preferential rates. An increased premium can be charged if a member institution did not comply with the prescribed solvency ratio, or carried out particularly risky activities. (Sections 121 (6) and (7) of the Act). On this account, the Board of Directors set an increased premium in 2010 for two member institutions. A total of HUF 228 thousand was received under this title. Preferential premiums are granted to member institutions that are members of voluntary deposit protection or institution protection funds licensed by the Supervision, referenced in subsection (1) of Section 121 of the Act. In 2010, no preferential premium was requested by the member institutions. 1.4 Fund ratio The fund ratio is the internationally accepted indicator of the asset position or sufficiency of deposit insurance institutions, which fund ratio compares the liquid assets of the Fund to the theoretical compensation obligations of the Fund towards member institutions, as of the same date. The assets available for indemnifying depositors in the case of bankruptcy of a credit institution derive basically from two sources of revenue: deposit insurance premiums paid by member institutions in the relevant year and yields of accumulated premiums invested in government securities. The NDIF assets available to indemnify depositors were on the rise due to the yields in excess of the inflation rate generated in on investments. At the turn of 2009/2010, the market value of the assets amounted to HUF 83 billion. At the beginning of 2010, the NDIF used HUF 3.2 billion on indemnification, but it had no considerable impact on the NDIF s assets. 17

18 The NDIF s fund ratio hardly changed, the compensation obligation grew considerably, still, a considerable portion of all savings was not subjected to deposit insurance besides an increasing compensation obligation, and the assets of the NDIF also grew. Dynamics of the fund ratio between 2003 and 2010 Table No. 7 Description 2003 actual 2004 actual 2005 actual 2006 actual 2007 actual 2008 actual 2009 actual 2010 actual NDIF compensation obligation ((in HUF 3,186 3,521 4,551 5,104 5,288 5,761 7,159 7,551 billion) NDIF s assets (in HUF billion)* Fund ratio % Average premium rate (per mill) * Market value including interest of the NDIF s liquid assets represented by securities as at the end of the year preceding the relevant year (opening value in the relevant year) 1.5 Explanation to balance sheet items Intangible assets a) Content: software 18

19 b) Structure Table No. 8 Description In HUF thousand Capitalized value of formation and transformation 2009 Effect of revision 2010 change Composition for the relevant year In HUF thousand % % Rights Intellectual property 34, ,508 2, % % - software owned 34,719 37,508 2, % % Advance payments on intangible assets Revaluation of intangible assets Total: 34, ,508 2, % % d) Priority changes in balances: Table No. 9 Description / in HUF thousand opening addition decrease reclassification closing GROSS VALUE 112,859 15, ,052 Intellectual property 112,859 15, ,052 - software 112,859 15, ,052 78,139 12, ,544 DEPRECIATION 78,139 12, ,544 Intellectual property 78,139 12, ,544 - software 34,720 2, ,508 34,720 2, ,508 NET VALUE 34,720 2, ,508 Intellectual property - software Intangible assets balance movements by type Table No. 10 Description / in HUF thousand Intangible assets ADDITIONS 4,875 15,183 - purchase 4,875 15,183 10,747 12,395 DISPOSALS 10,747 12,395 - depreciation Intangible assets balance movements in depreciation as specified in the accounting act Table No. 11 Description / in HUF thousand opening additions disposals reversal closing DECREASE IN DEPRECIATION 78,139 12, ,544 PROJECTED 78,139 12, ,544 - linear 78,139 12, ,544 19

20 1.5.2 Tangible assets a) Content: rented buildings, equipment, IT, vehicle. Structure: Table No. 12 Description In HUF thousand 2009 Effect of revision 2010 change Composition for the relevant year In HUF thousand % % Rights related to land and buildings ,130 1, % 7.54% - plot of land, land allotment % 0.02% - buildings, parts of buildings ,127 1, % % Equipment, fittings, vehicles 17, ,856-3, % 92.46% - office technology equipment 1,928 1, % 7.61% - vehicles 8,860 8, % 56.01% - IT equipment 5,918 3,979-1, % 26.55% - furniture % 1.59% - other % 0.69% Total: 17, ,986-2, % % d) Priority changes in balances: Table No. 13 Description / in HUF thousand opening addition decrease reclassification closing GROSS VALUE 70,285 4,806 9, ,728 Rights related to land and buildings 4,700 1,111 5,811 Equipment, fittings, vehicles 65,585 1,292 6,960 59,917 Capital projects in progress 2,403 2,403 0 DEPRECIATION 52,728 4,973 6, ,741 Rights related to land and buildings 4, ,681 Equipment, fittings, vehicles 48,132 4,888 6,960 46,060 NET VALUE 17, , ,987 Rights related to land and buildings 104 1, ,130 Equipment, fittings, vehicles 17,453-3, ,857 Capital projects in progress 0 2,403 2, Tangible assets balance movements by type Table No. 14 Description / in HUF thousand Tangible assets ADDITIONS 23,470 2,403 - purchase 5,020 2,403 - other additions 18,450 0 DISPOSALS 4,302 4,973 - depreciation 4,302 4,953 - impairment

21 Tangible assets balance movements in depreciation as specified in the Accounting Act Table No. 15 Description / in HUF thousand opening addition decrease reversals closing DECREASE IN DEPRECIATION 52,728 4,973 6, ,741 PROJECTED 52,728 4,953 6, ,741 - linear 51,202 4,445 6,263 49,384 - single-amount 1, ,357 IMPAIRMENT asset disposal Tangible assets indicators Table No. 16 Description 2009 % 2010 % change % Proportion of assets: 33.58% 28.55% % Asset ratio: 0.02% 0.02% 0.00% Attrition level: 24.98% 22.80% -8.72% Coverage ratio of tangible assets: 484,586.21% 605,708.23% 24.99% Efficiency ratio of tangible assets: 13,195.51% 16,432.12% 24.53% Financial investments The Fund holds no financial investments Inventories a) Content: goods b) Structure: Table No. 17 Description In HUF thousand 2009 Effect of revision 2010 change Composition for the relevant year In HUF % thousand Raw materials Goods - commercial goods Total: Receivables a) Content: receivables from member institutions, receivables from credit institutions, other receivables 21

22 b) Structure: Table No. 18 Description In HUF thousand 2009 Effect of revision 2010 change Composition for the relevant year In HUF thousand % % Receivables from member institutions 23, , ,143 1,347.91% 99.93% = receivables transferred due to deposit withdrawals 262,126 3,403,555 3,141,429 1,198.44% 1,007.95% = depreciation reversal of receivables transferred due to deposit withdrawals -238,820 3,066,106-2,827,286-1,183.86% % = accessory costs due to deposit withdrawals 16,690 28,738 12, % 8.51% = depreciation reversal of accessory costs due to deposit withdrawals -16,690-28,738-12, % -8.51% Other receivables from credit institutions % 0.00% - due to guarantee and redemption of onerous obligations % 0.00% - depreciation reversal due to guarantee and redemption of onerous obligations % 0.00% Other receivables: % 0.07% - Accounts receivable % 0.00% - Interest-free housing loans % 0.00% - Advances paid % 0.00% - Reclassified tax payment obligations % 0.06% - Other receivables 0 11, % 0.01% Total: 24, , ,668 1,306.84% % Receivables balance certificates c) Priority balance certificates: Table No. 19 Description / in HUF thousand Trade debtors 23, ,449 - from the outstanding balance 23, ,449 = not disputed 23, ,449 - from the outstanding balance 23, ,449 = months , ,449 Various other receivables from the outstanding balance Change in depreciation in accordance with the Accounting Act: Table No. 20 Description / in HUF thousand Accounting Accounting Act Act opening additions disposals reversal closing Receivables from member institutions 255,510 2,839,333 3,094,843 Total 255,510 2,839, ,094,843 22

23 Amount of receivables to be collected per member institution: Table No. 21 Description In HUF thousand receivable amount onerous obligations depreciation opening depreciation closing closing book value Heves és Vidéke Tksz. deposits 262, , ,820 23,306 Heves és Vidéke Tksz. incidental costs 16, ,690 16,690 0 Általános Közlekedési Hit. deposits 3,141, ,827, ,143 Általános Közlekedési Hit. incidental costs 12, ,048 0 Total: 3,432, ,510 3,094, ,449 Receivables transferred to the Fund per member institution: Table No. 22 Description In HUF thousand Frozen deposits amount Disbursements in the relevant Amount of disbursements year total principal total principal Heves és Vidéke Takarékszövetkezet 1,389, , ,126 0 Általános Közlekedési Hitelszövetkezet 3,288,532 3,141,428 3,098,293 43,135 3,141,428 3,098,293 43,135 Total: 4,677,622, 3,141,428, 3,098,293, 43,135, 3,403,555, 3,360,420, 43,135, Securities a) Content: government bonds. discount treasury bills (T-bills) NBH bonds. b) Structure: Table No. 23 Description 2009 effect of 2010 change Composition for the relevant year In HUF thousand revision In HUF % % thousand Government securities 82,829, ,640,918 1,811, % 96.11% - domestic government securities 82,829, ,640,918 1,811, % 96.11% = Hungarian government bonds 74,862, ,066,043-6,796, % 77.29% = discount treasury bills 7,966, ,574,875 8,608, % 18.82% - Other securities 0 0 3,427,153 3,427, % 3.89% = NBH bonds 0 0 3,427,153 3,427, % 3.89% Total: 82,829, ,068,071 5,238, % % 23

24 Securities balance movements Table No. 24 Description / in HUF opening additions disposals closing thousand GROSS VALUE 82,829, ,052, ,814,158 88,068,071 Government securities 82,829, ,648, ,836,455 84,640,918 - domestic government securities 82,829, ,648, ,836,455 84,640,918 = Hungarian government bonds 74,862, ,050, ,847,292 68,066,043 = discount T-bills 7,966,714 47,597,324 38,989,163 16,574,875 Other securities 0 124,404, ,977,703 3,427,153 - NBH bonds 124,404, ,977,703 3,427,153 DEPRECIATION NET VALUE 82,829, ,052, ,814,158 88,068,071 Government securities 82,829, ,648, ,836,455 84,640,918 - domestic government securities 82,829, ,648, ,836,455 84,640,918 = Hungarian government bonds 74,862,528,107,050, ,847,292 68,066,043 = discount T-bills 7,966,714,47,597,324 38,989,163 16,574,875 Other securities 0 124,404, ,977,703 3,427,153 - NBH bonds 0 124,404, ,977,703 3,427,153 Securities balance movements by type Table No. 25 Description / in HUF thousand Securities ADDITIONS 244,318, ,052,987 - purchase 244,318, ,052,987 DISPOSALS 230,488, ,814,158 - sale 230,488, ,814,158 c) Priority balance certificates: Change in depreciation in accordance with the Accounting Act: -. Differences between purchase and face values: Table No. 26 Description In HUF thousand Purchase value on acquisition Face value on acquisition 2009 market value 2009 audited value Hungarian government bonds 68,066,042 71,207,880 68,066,042 68,066,042 Discount treasury bills 16,574,875 17,059,010 16,574,875 16,574,875 NBH bonds 3,427,154 3,432,020 3,427,154 3,427,154 Total: 88,068,071 91,698,910 88,068,071 88,068,071 24

25 Securities indicators Table No. 27 Description 2009 % 2010 % change % Proportion of securities: 99.97% 99.59% -0.38% Ratio of securities: 96.53% 96.84% 0.32% Short-term liquidity III: 11,384.76% 92,066.58% % Liquid assets a) Content: cash, bank accounts. b) Structure: Table No. 28 Description In HUF thousand 2009 Effect of 2010 change Composition for the relevant year revision In HUF thousand % % Cash % 0.62% Bank deposits 1, ,426 26,672 1,520.64% 99.38% Total 1, ,602 26,688 1,394.36% % Prepaid expenses a) Content: due to revenues, due to expenses. b) Structure: Table No. 29 Description in HUF thousand 2009 Effect of revision 2010 change Composition for the relevant year In HUF thousand % % Total accrued income 2,896, ,449, , % 99.92% - accrued income 20,817 8,016-12, % 0.32% - accrued interest 2,875,275 2,441, , % 99.60% Prepayment of costs and expenses 2, , % 0.08% - prepaid costs 2,087 1, % 0.08% Total 2,898, ,451, , % % d) Comments: Effect of the proportion of exchange gain for the year on purchasing interest-bearing securities: HUF Provisions No provisions were accumulated. 25

26 1.5.9 Long-term liabilities The Fund does not have any long-term liabilities Short-term liabilities a) Content: liabilities towards depositors, other liabilities. b) Structure: Table No. 30 Description 2009 Effect of 2010 change Composition for the relevant year % In HUF thousand revision In HUF % thousand Liabilities towards depositors 78, , % 81.57% - other deposit insurance liabilities 78,053 78, % 81.57% Other short-term liabilities 649, , , % 18.43% - Trade creditors 1,122 10,690 9, % 11.17% - Liabilities towards the central budget ,945 6,828 5,835.90% 7.26% = other taxes 117 6,945 6,828 5,835.90% 7.26% - Other short-term liabilities 648, , % 0.00% Total: 727, , , % % Short-term liabilities balance movements Table No. 31 Description / In HUF thousand Liabilities towards depositors - other deposit insurance liabilities 78,053 78,053 outstanding as of the report date 78,053 78,053 Other short-term liabilities Trade creditors Accrued expenses a) Content: costs, due to deferred revenues. - settled up to the report date 1,122 10,690 paid up to the report date 1,122 10,690 - settled up to the report date 649,509 17,635 paid up to the report date 649,509 17,635 26

27 b) Structure: Table No. 32 Description 2009 Effect of 2010 change Composition for the relevant year In HUF thousand revision In HUF thousand % % Accrued income % 0.00% Accrued costs and expenses 4, ,307 67,111 1,599.40% % - accrued costs 4,196 71,307 67,111 1,599.40% % Total 4, ,307 67,111 1,599.40% % Equity a) Content: registered capital, reserves, profit/loss for the relevant year. b) Structure: Table No. 33 Description 2009 Effect of 2010 change Composition for the relevant year In HUF thousand revision In HUF thousand % % Registered capital 886, , % 0.99% Reserves 70,725, ,177,873 13,452, % 92.74% Revaluation reserve % 0.00% Retained profit for the relevant year 13,452, ,697,480-7,755, % 6.27% Total 85,073, ,771,435 5,697, % % Equity calculation of the reserve Table No. 34 Legal titles in HUF thousand 2009 Effect of revision Opening reserves 68,144,325 70,725,129 Changes in the relevant year 2,580,804 13,452,744 Closing reserves 70,725,129 84,177,

28 1.6 Explanation to the items of the profit and loss statement Profit and loss account per operating activity: Table No. 35 (data In HUF thousand) Description Deposit Insurance Asset management Operation Total I Premium revenue from member institutions 2,280,203 2,435, ,280,203 2,435,030 Premium revenue from claims collected on behalf of depositors Commission revenue from disbursement of deposits insured with state guarantee Revenue from other deposit insurance 36,400 27, ,400 27,401 Revenues from deposit insurance ( ) 2,316,603 2,462, ,316,603 2,462,517 II. Other revenues 8,065 50, ,320 50,891 III Revenues from other than deposit insurance IV Revenues from financial transactions ,529,322 7,034, ,529,322 7,034,960 V Extraordinary revenues Expenses related to the disbursement of frozen deposits VI Expenses related to receivables collected on behalf of depositors Expenses incurred on disbursement of deposits guaranteed by the state Other expenses of deposit insurance 337 2,839, ,839,333 Expenses of deposit insurance ( ) 337 2,839, ,839,333 VII Other expenses 0, VIII Expenses of other than deposit insurance IX Expenses of financial transactions 0 0 1,166, , ,166, ,357 X Extraordinary expenses Material type expenses ,826 80,639 76,826 80, Personnel expenses , , , , Depreciation write-off ,049 17,347 15,049 17,347 XI Operating costs ( ) , , , ,608 RETAINED PROFIT FOR A THE YEAR (I+II+III+IV+V-VI- VII-VIII-IX-X-XI) 2,324, ,174 11,362,940 6,243, , ,949 13,452,744 5,697,480 28

29 1.6.1 Revenues from deposit insurance and other revenues a) Content: premium revenue from member institutions, other income derived from deposit insurance, other income. b) Structure: Table No. 36 Description In HUF thousand 2009 Effect of revision table Composition for In HUF % the relevant year thousand % Premium revenue from member institutions 2,280, ,435, , % 96.88% - standard premium revenue 2,280,203 2,434, , % 96.88% - increased premium revenue % 0.01% - premium reimbursement % 0.00% Premium revenue from claims collected on behalf of depositors % 0.00% Commission revenue from disbursement of deposits insured with state % 0.00% guarantee Other revenue from deposit insurance 36, ,400-9, % 1.08% - revenue from sale of assets received in return for claims % 0.00% - reversal of depreciation related to deposit insurance % 0.00% - HFSA (PSZÁF) fines 36,400 27,400-9, % 1.09% - other revenue from deposit insurance % 0.00% Other revenues 8, ,891 42, % 2.02% Total 2,324, ,513, , % % Operating costs, expenses a) Content: cost types, other expenses. b) Structure: Table No. 37 Effect of change Composition for Description 2009 revision 2010 the relevant year In HUF thousand In HUF % thousand % Expenses from deposit insurance ,839,333 2,838, ,432.05% 92.80% - other expenses from deposit insurance ,839,333 2,838, ,432.05% 92.80% Expenses from other than deposit insurance % 0.00% Cost types - materials 76, ,639 3, % 2.64% = cost of materials 4, , % 0.16% = material type of services used 68, ,510 3, % 2.37% = other services 3, , % 0.12% - payroll expenses 142, ,622-20, % 3.98% - depreciation 15, ,347 2, % 0.57% Other expenses % 0.02% Total 235, ,059,531 2,824,412 1,201.27% %

30 Priority changed in balances: Table No. 38 Description In HUF thousand 2009 Effect of revision 2010 change In HUF % thousand Composition for the relevant year % Services used - transportation, loading, warehousing, packaging 3,166 3, % 5.11% - renting and hiring fees 1,667 1, % 2.36% - maintenance costs 2,079 2, % 3.15% - postage and telecommunications services 6,200 5, % 7.20% - training and further training % 0.57% - advertising, publicity and propaganda services % 1.24% - business travels, secondment costs 5,894 7,534 1, % 10.39% - membership premiums 2,337 2, % 3.43% - auditor s fee 2,516 2, % 3.54% - expert services 28,454 26,145-2, % 36.06% - specific services to the company activity % 0.41% - other services used 15,823 19,249 3, % 26.55% Total 68, ,510 3, % % Table No. 39 Description In HUF thousand Other services 2009 Effect of revision 2010 In HUF thousand change % Composition for the relevant year % - insurance premiums 2,817 1,569-1, % 42.78% - banking costs 1,118 1, % 44.17% - authority fees % 13.05% Total 3, , % % Table No. 40 Description In HUF thousand 2009 Effect of revision 2010 change Composition In HUF % for the relevant year thousand % Other expenses: % % - impairment % 3.39% - without taxes, contributions and innovation contributions % 79.66% - motor vehicle weight tax % 11.86% - fines, penalties, late payment interest imposed by APEH and Social % 0.00% Security - other, non-priority % 5.09% Total: % % c) Comment: Priority changes in balances: Results of financial activities a) Content: 30

31 b) Structure: revenue from financial transactions, expenses of financial transactions. Table No. 41 Description In HUF thousand Revenues from financial activity 2009 Effect of revision 2010 change Composition In HUF % for the relevant year thousand % Interest received 6,400 8,878 2, % 0.13% Revenues from financial transactions 12,522, ,026,081-5,496, % 99.87% - exchange rate gains on investments in foreign % 0.00% currency - profit on Hungarian government bonds 12,522, ,026,075-5,496, % 99.87% = exchange gains on Hungarian government 5,318,707 1,415,302-3,903, % 20.12% bonds = profit from interest on Hungarian government 4,858,163 4,789,349-68, % 68.08% bonds = exchange gains on discount treasury bills 689, , , % 8.38% - exchange gains on other securities 1,656, ,703-1,424, % 3.29% - profit on foreign exchange futures hedge % 0.00% transactions Total: 1,636, ,636, % 0.00% Financial expenses 12,529, ,034,959-5,494, % % Interests paid and similar expenses Expenses of financial transactions % 0.00% - exchange rate loss on investments in foreign 1,155, , , % 90.22% currency - loss on Hungarian government securities % 0.01% = exchange rate loss on Hungarian government 1,155, , , % 90.21% bonds = exchange rate loss on discount treasury 1,155, , , % 90.20% bills Other financial expenses 0, % 0.01% Total: 10,687 77,376 66, % 9.78% Balance 1,166, , , % % Revenues from financial activity 11,362, ,243,601-5,119, % % Extraordinary profit/loss No extraordinary profit/loss was represented. 1.7 Supplementary data The following supplement is provided to a more complete evaluation of the Annual Report: Headcount, payroll accounting Average statistical headcount: Table No 42 headcount Physical

32 White-collar 7 7 Total headcount: Priority payroll-related expenses: 7 7 Table No. 43 In HUF thousand / year incentives 10,713 2,931 - social cost refund 1,486 1,557 - other 2,091 3,931 Total payroll-related expenses 14,290 8,575 Social security expenses 29,571 23,353 Taxes on wages: - paid by the employer 2, incentives 0 1, The Fund s assets, financial and earnings positions Presentation of the securities portfolio and assessment of the asset managers work The book value of the relevant year s opening securities portfolio was HUF thousand, and at the end of the relevant year, securities were represented in the balance sheet at HUF thousand (closing balance). The latter included HUF thousand in Hungarian government bonds and HUF thousand in discount treasury bills. The securities portfolio increased by 6.32%. The following table shows the effect of asset management on the retained profit for the relevant year: Table No. 44 (data: in HUF thousand) Profit/loss component Revenue Expense Profit/loss Exchange gains/losses on Hungarian government bonds Interest gains on Hungarian government bonds Exchange gains/losses on discount government securities Yield of NBH bonds Commission on portfolio management Custodian commission Fee to KELER Total 1,415, , ,458 4,789, ,789, , , , , ,895-66, ,211-2, ,270-8,270 7,026, ,288 6,234,787 The year 2010 was fairly eventful in the domestic securities market, which is still the only investment possibility for the Fund. Until the end of April, trading was characterised by an optimist climate, decreasing yields and soaring bond prices. From the end of April, however, the rapidly worsening international environment markedly left its trace on the domestic climate. From the summer months on, the domestic factors put the market of Hungarian government bonds on a roller coaster. Due to a lack of confidence concerning Hungary, the yield curve became permanently steep. After 32

33 a temporary calm in the early autumn, another rise was seen in yields. For shorter terms, yields expectations were raised by more austere measures by the central bank, while for longer terms, by medium and long-term concerns for Hungary. For long-term bonds (10-15 years), fairly high yield levels were reached by early December, and values around 8% could not be much surpassed even by the end of the year. At the end of the year, NBH benefiting from the optimist climate decided on decreasing the base rate by 25 base points in all the three interest rate decision meetings scheduled, reducing the domestic interest level from 6.25% to 5.75%. Although the Monetary Council passed decisions that are unambiguous to interpret subsequently, analysts predicted the end of interest rate reduction at 5.5% as late as in February, as an effect of unfavourable international trends. According to opinions of the time, although the Hungarian figures of inflation and boom would justify decreasing interest rates, insufficient latitude is allowed by the wave of risk aversion revived in the wake of international banks measures to reduce liquidity and by potentially deteriorating risk assessment of Hungary. NBH reduced the base rate once again in April; however, they became more cautious in the following months, and opted for retaining the 5.25% level of the base rate instead. Due to the uncertainty experienced in the last months of the year, the Monetary Council decided on a 25-base point increase at each of its meetings held in November and December, with reference to their view that the expected inflation rate will exceed the Central Bank s target figures in all terms. Our three portfolio managers achieved a gross yield of 7.56% on the whole portfolio. In 2010, asset management added HUF 6,234 million to the retained profit. The profit of portfolio management was reduced by the fees paid to the portfolio manager, to the custodian and to KELER. In the relevant year, Pioneer, MKB and OTP achieved yields of 7.34%, 7.55% and 7.79%, respectively, and the figure of MAX-C was 6.46% in the corresponding period. No investments were made in foreign government securities in the relevant year Summary evaluation of the profit In the relevant year, the NDIF generated a profit of HUF 8,536,813 thousand, which is HUF 4,916 million less than the retained profit of The key components of the change are presented in the following table. 33

34 Table No. 45 Description 2009 Effect of 2010 change change In HUF thousand revision In HUF thousand % Revenue from deposit insurance 2,316, ,462, , % Other revenues 8, ,891 42, % Revenues from financial transactions 12,529, ,034,960-5,494, % Total revenues 14,854, ,548,368-5,305, % Expenses of deposit insurance ,839,333 2,838, ,432.05% Other expenses % Expenses of financial transactions 1,166, , , % Total expenses 1,167, ,631,280 2,464, % Operating costs 234, ,608-14, % Total expenses and operating costs 1,401, ,850,888-2,449, % Retained profit 13,452, ,697,480-7,755, % The retained profit decreased by 57.65% in comparison to the previous year s figure, partly due to reduced revenues from financial operations, and partly because of a significant depreciation represented on account of a credit institution. Expenses increased by %, of which the decrease in the expenses of financial operations was offset by a significant increase in the depreciation represented. The following diagram shows the total revenues and expenses of the NDIF according to the profit and loss statement from its foundation in 1993 until

35 1.8.3 Trends of the Fund s equity and profits from foundation up to date When examining this graph, it must be taken into consideration that the equity contains accumulated profits of the preceding years, as well as those of the relevant year, therefore the equity growth is influenced by the fluctuation of profit. The fluctuation of profit seen from 1998 until 2004 is explained by the dynamics of recovery prospects related to the liquidation of Realbank Rt, while for the succeeding years, mainly by the changes in the yields of the government securities market. The drop in 2010 was on account of payments made due to indemnification of Általános Közlekedési Hitelszövetkezet. 1.9 Explanations for the major differences between projected and actual data for 2010 Premium revenues from member institutions exceeded the projected figure by 3.7%. Other deposit insurance revenues were realised at 91% of the projected figure. This represents the portion of fines imposed on the NDIF by the supervision which is difficult to project. The Other revenues contain the late payment amount (HUF 50,608 thousand) transferred by the liquidator of Rákóczi Hitelszövekezet, the costs of mobile phones invoiced to the staff (HUF 218 thousand), as well as the fees of other taxable activities (HUF 65 thousand). With these amounts, the figure projected to 2010 was outperformed by 12%. It is expedient to examine revenues and expenses from financial transactions together, because we planned expected portfolio results on estimating both revenues and expenses. The following assumptions were made on planning financial operations: the annual average fixed balance of the portfolio will be HUF 82.8 billion at original cost, where the projected yield and the return reinvested in the portfolio were also taken into account; divestment due to indemnification payments were projected at HUF 3.1 billion; portfolio managers estimate an average return of 7% on securities; 35